It has almost become a cliché for a company to state that ”People Are Our MOST Important Assets” and yet it’s true. The "people cost" of an organization compared to the capital cost is often in the range of 3 to 5:1.
Put that way there’s a huge upside to increasing the productivity and value of your organization if you can get a hold of the metrics that work for your company.
Some HR specialists resist financial metrics applied to their workforce. In some cases the objection is philosophical (i.e. “People are more than money”), for others it is an aversion to math or financial metrics. It's absolutely true that people are worth more than money, and it is for that reason their value must be linked to business outcome, otherwise their importance and impact will not be adequately understood.
Effective HR departments enable and support management to maximize the return on investment in Human Capital. HR departments that fail to execute that critical mission become functional only as administrative and compliance centers. Functions which in many cases can be outsourced.
Whether you’re a publicly traded company or a small- non profit, measuring the quality, effectiveness and productivity of your people is crucial.
Which brings us to Profit per Full – Time Equivalent (FTE) (obviously, not applicable to non-profit organizations). For many businesses, Profit per FTE (or EBIDTA/FTE) is a good place to start.
If we make improvement in the management, selection and retention of our high performers that will have impact on our engagement, productivity and profitability. Likewise if we reduce time to hire, time to occupational functional point, cost per hire and HR costs per employee this will also impact profitability.
By tracking Profit per FTE you will be able to see the impact of your investment and development of your Human Capital.
Please note that you want exclude any revenue from outside your organizations regular business activity (the sale of a factory for example, is not “Operating Revenue”).
You also want to be consistent in your calculation of FTE. The most common way to calculate FTE is to add all hours worked by your employees and divide by the number of hours in your work week.
If you use contract or temporary labor you may wish to include them, just be sure that if you do- you do so consistently so that this metric can be compared with other reporting periods.
This metric works better with companies that do not have wide swings in revenue or expenses from one period to the next.
Learn how assessments can help you execute your Strategic Plan and how to choose a consultant.
No Registration Required: